Beyond Markets and States: Polycentric Governance of Complex Economic Systems Elinor Ostrom Prize Lecture, December 8, 2009
Brief Overview of the Journey The Earlier World View of Simple Systems Efforts to Understand Complex Systems ◦ Studies of Polycentric Water and Police Industries ◦ Doubling the Types of Goods ◦ Developing the Institutional Analysis & Development (IAD) Framework
Are Rational Individuals Helplessly Trapped in Dilemmas? Earlier studies recorded settings where humans self-organized to cope with common-pool dilemmas ◦ Little knowledge accumulation until a US National Resource (NRC) Committee studied common-pool resources across disciplines, sectors and countries ◦ Meta-analysis discovered diversity of locally known property rights to control resource use Empirical Studies of Common-Pool Resource Dilemmas ◦ In the experimental laboratory ◦ Irrigation systems in Nepal ◦ Forests around the world
Current Theoretical Developments ◦ Many scholars now developing behavioral theories of individual choice ◦ Central role of trust in coping with dilemmas now seen for its importance Lessons from Studying Complex Systems ◦ Rules need to fit social-ecological context ◦ Polycentric systems may enable a fit between human action situations and nested ecological systems ◦ Panaceas are potentially dysfunctional ◦ Now, lets review the journey – back to the 1960’s
Complex Human Systems Were Considered Chaotic in 1960s ◦ Scholars criticized the number of government agencies rather than trying to understand why created and how they performed. ◦ Maps showing many governments in a metropolitan area were used as evidence for the need to consolidate. ◦ V. Ostrom, Tiebout & Warren developed concept of polycentric systems to analyze performance rather than criticize messy maps
Mechanisms Found to Improve Output in Polycentric Systems Small to medium-sized cities are more effective monitors of performance & costs. Citizens who are dissatisfied with service provision can “vote with their feet” and move to jurisdictions that come closer to their preferred mix and costs of public services. Local incorporated communities can contract with larger producers and change contracts if not satisfied with the services provided while urban districts inside a large city have no voice.
Police Industry Studies In-depth studies of police served by multiple sized departments in six metropolitan areas Not a single instance was found where a large centralized police department outperformed smaller departments serving similar neighborhoods in regard to multiple indicators.
80 Metropolitan Area Study Large number of direct service (e.g. patrol) producers found to be more efficient. Small number of indirect service producers (e.g. radio dispatching & criminal laboratory analyses) also more efficient Thus, mix of large & small most efficient Rejected theory underlying metropolitan reform approach. Demonstrated that complexity is not the same as chaos in regard to metropolitan governance.
Empirical Work Led to a Doubling of the Types of Goods Instead of private vs public goods Added common-pool resources ◦ Shares subtractability with private goods & difficulty of exclusion with public goods ◦ Forests, water systems, fisheries, and the global atmosphere are of immense importance for the survival of humans. Also added toll goods to build on earlier work of Buchanan on club goods
Four types of goods Subtractability of Use High Low Common-pool resources : Public goods : peace and groundwater basins, security of a community, lakes, irrigation systems, national defense, knowledge, Difficulty of High fisheries, forests, etc. fire protection, weather Excluding forecasts, etc. Potential Beneficiaries Private goods : food, Toll goods : theaters, private Low clothing, automobiles, etc. clubs, daycare centers Source : Adapted from E. Ostrom (2005: 24).
Developing a Framework The Institutional Analysis and Development (IAD) framework The work of many colleagues over time Contains a nested set of building blocks that social scientists can use in efforts to understand human interactions and outcomes across diverse settings. Exogenous variables affect the internal working parts of an action situation that in turn affect interactions and outcomes.
A framework for institutional analysis Exogenous Variables Biophysical Conditions Attributes of Action Community Interactions Situations Evaluative Rules-in-Use Criteria Outcomes Source : Adapted from E. Ostrom (2005: 15).
Internal Parts of Action Situations Similar to the working parts of a game so that IAD can be used to organize game theoretical analysis, agent-based models, design of laboratory experiments, and for collecting, coding and analyzing extensive data from field research
The internal structure of an action situation Exogenous Variables ACTORS INFORMATION CONTROL about over assigned to POTENTIAL POSITIONS Linked to OUTCOMES assigned to NET COSTS AND BENEFITS assigned to ACTIONS Source : Adapted from E. Ostrom (2005: 33).
ARE RATIONAL INDIVIDUALS HELPLESSLY TRAPPED IN SOCIAL DILEMMAS? Theory presented humans in commons dilemmas as unable to extract themselves. They were “trapped” But other humans – public officials – were supposed to impose optimal devised by scholars on resource users. Government or private ownership presumed to be optimal.
Earlier Knowledge of Self- Organization did not Cumulate Many studies conducted by ◦ Scholar from multiple disciplines about ◦ Diverse sectors in ◦ Different regions More attention paid to news reports of resource destruction NRC committee in mid 1980s brought scholars from all traditions together to present an overview of the empirical studies
Meta Analysis of Common-Pool Resource Studies IAD framework used to develop coding manual Difficult due to lack of agreement of earlier scholars about what should be reported 47 irrigation systems & 44 fisheries analyzed. Over 72% of farmer managed systems had high performance – crops grown, benefit-cost ratio 42% of governmental irrigation systems had high performance even with fancy engineering Informal fishery groups allocated space, time, and technology to try to reduce over- harvesting Groups that did not communicate were more likely to overuse their resource
Clarifying Concepts “Common-property resource” widely used Confused the concept of property and that of resource Need to switch to “common-pool resources and “common- property regimes” Found five types of property rights rather than just one Access, withdrawal, management, exclusion & alienation rights were all real rights Property rights systems may mixtures of the 5, not just alienation rights
Finding Diversity of Rules Resource uses had devised immense number of different rules fitting their local resource system Again IAD helped us identify order from this initially chaotic morass We asked: What part of an action situation does a rule affect?
Rules as exogenous variables directly affecting the elements of an action situation Information Aggregation Rules Rules Boundary ACTORS Rules INFORMATION CONTROL about over assigned to Position Scope POTENTIAL POSITIONS Linked to Rules Rules OUTCOMES assigned to NET COSTS AND BENEFITS Choice assigned to ACTIONS Rules Payoff Rules Source : Adapted from E. Ostrom (2005: 189).
Long-Surviving Institutions Once studies were coded, I had hoped it would be feasible to find an optimal set of rules used by robust, long- surviving institutions and not used in the fragile ones. After a long struggle – realized this was not feasible and turned to the analysis of underlying practices of successful systems (design principles) not present in failures
A Quick Overview Boundaries of users & resource are clear Congruence between benefits & costs Users had procedures for making own rules Regular monitoring of users and resource conditions Graduated sanctions Conflict resolution mechanisms Minimal recognition of rights by Government Nested enterprises
Empirical Studies in the Lab Laboratory provides the capability to design a CPR experiment and slowly change one factor at a time to assess the impact on outcomes. When subjects make decisions anonymously with no communication – overharvest even worse that predicted! Face-to-face communication (cheap talk) enables them to increase cooperation If they design own sanctioning system achieve close to full optimality Field experiments testing how resources users themselves act in different structures
Irrigation Systems in Nepal Compared systems designed by engineers & run by government with those built & run by farmers Farmer-systems were quite “primitive” in terms of construction, but they were able to: ◦ grow more crops, ◦ run their systems more efficiently, and ◦ get more water to the tail-end
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